Bad debts and distribution costs hit Arran

New figures show that Arran Brewery recorded a sales increase of 36% to £1,368,657 in 2016, although bad debts and distribution costs meant the company recorded a trading loss of £108,162 for the period.

Sales were actually up 45% on the previous period, but as the reporting year was extended by three months, the actual rate of growth was 36%.

Managing director, Gerald Michaluk, said: “We had to write off bad debts of some £52,462 and increased distribution costs of £58,975 over what we would have expected, based upon the volume of business volume increase.

“Clearly we have got our distribution strategy wrong and need to address this urgently. Other bad debts related to trade customers going into administration and poor risk assessment and lack of trade account credit limits being set as we had moved to a new accounting package.

“To correct the situation, we transferred our brewery manager into a logistics role. She is currently completing a part-time MSc in production and logistics management via Liverpool University.”

Gerald added: “While we are addressing the credit control issue by ensuring credit is only given were necessary to win the business, and personal as well as company guarantees are provided or the balance sheet justifies the risk, the brewery’s balance sheet remains strong, despite the loss.

“I am anticipating a similar scale drop in sale volume in 2017 as we pull back from accounts where we cannot make a decent margin or the distribution costs are too high to get the beer to.

“What this has shown us is there is demand for our products throughout the UK, but we need to crack getting it there at a sensible price so we, as well as our customer, can make a sensible profit.”